A Visual Representation of the MIP

This post was written by

Economonitor have put together some charts using the EU’s new Macroeconomic Imbalance Procedure which was introduced as part of last year’s ‘Six Pack’.  The charts are a little busy but the relative imbalances across the 11 economies covered are pretty clear.

 

Individual charts are produced for each of the countries.

It is not clear what impact the MIP will have.  Following the first alert mechanism report issued in February, in-depth reviews were issued for 12 countries over the summer (‘programme’ countries are excluded from the MIP).  The country reviews are at the bottom of this page

The conclusion of the reviews for Belgium, Bulgaria, Denmark,  Finland, Sweden and the UK was:

This in-depth review concludes that [country] is experiencing macroeconomic imbalances, which are not excessive but need to be addressed.

For France, Italy, Hungary and Slovenia the conclusion was:

This in-depth review concludes that [country] is experiencing serious macroeconomic imbalances, which are not excessive but need to be addressed.

While for Spain and Cyprus the conclusion was:

This in-depth review concludes that [country] is experiencing very serious macroeconomic imbalances, which are not excessive but need to be urgently addressed.

In no case was a formal Excessive Imbalance Procedure initiated so there is no example to indicate how this will look in practice.  Of course, 21 Member States remain subject to an Excessive Deficit Procedure.  Earlier this year Karl Whelan wrote a useful paper discussing, among other things, the imbalance scorecard devised for the MIP.

2 Responses to “A Visual Representation of the MIP”

  1. grumpy Says:

    So the Macroeconomic Imbalance Procedure appears to amount to adjective selection and something from the Excel graphs function that Joan Miró i Ferrà might have rustled up?

  2. DOCM Says:

    The most interesting comment is that by Karl Whelan in his paper;

    “The Regulation introducing the Macroeconomic Imbalance Procedure states that for Member States that accumulate large current-account surpluses, policies should aim to identify and implement measures that help strengthen their domestic demand and growth potential. As shown in Figure 4, the current German surplus is large by any reasonable interpretation of this word. Its estimated 2011 surplus is larger than the combined deficits of Italy, Spain, Greece and Portugal put together. There can be little doubt that efforts to boost aggregate demand in Germany would help to reduce current account deficits elsewhere in the Euro system. However, the scoreboard does nothing to encourage Germany to boost domestic demand. It measures the size of deficits and surpluses relative to an individual economy’s GDP and uses a 6 percent surplus threshold which, somewhat conveniently, is 0.1 percent above the current three-year average for Germany.”

    One is forced to the conclusion that the only real value to the MIP is that it tentatively tackles this elephant in the room and may assist in the political change in thinking that is required in Germany.

Leave a Reply